How to understand the 'wave-like' and 'zigzag' Chinese economic recovery
Published: Aug 29, 2023 09:22 PM
A port in Qingdao, Shandong Province Photo: VCG

A port in Qingdao, Shandong Province Photo: VCG

China's GDP grew by 5.5 percent year-on-year in the first half of 2023. The recovery trend in the Chinese economy has attracted widespread attention both domestically and internationally. After a stable transition in epidemic prevention and control, economic recovery is a "wave-like" and "zigzag" progress.

"After a smooth transition in epidemic prevention and control, economic recovery is a process of 'wave-like' development and tortuous progress. The Chinese economy has strong resilience, tremendous potential and great vitality, and the fundamentals sustaining China's long-term growth will remain unchanged." On July 24, the Political Bureau of the Communist Party of China (CPC) Central Committee held a meeting to analyze the current economic situation and make arrangements for economic work in the second half of the year. Xi Jinping, general secretary of the CPC Central Committee, presided over the meeting. 

To deeply understand the "wave-like" and "zigzag" progress of China's economic recovery, it is necessary to analyze and identify the bright spots in economic operation.  Reviewing the achievements of the first half of the year, the export performance of electric passenger vehicles, lithium batteries and solar cells, known as the "new three items" for foreign trade exports, has been impressive. 

Take new energy vehicles as an example. More than half of the world's new energy vehicles are running in China. According to the Axios news website, China's EV industry has soared in recent years thanks to government incentives, cutthroat competition and receptive consumers. The total export growth of the "new three items" was 61.6 percent, contributing 1.8 percentage points to the overall export growth. Behind these numbers is the accelerated improvement in the quality and efficiency of foreign trade, the upgrading of industries, and the strong momentum of "Made in China."

To deeply understand the "wave-like" and "zigzag" progress of China's economic recovery, it is also necessary to observe it from the global perspective. The global economy continues to gradually recover from the pandemic and the Russia-Ukraine conflict, but it is not yet out of the woods, said Pierre-Olivier Gourinchas, the IMF's chief economist.

Tremendous development resilience and potential

The Chinese economy is not a pond, but an ocean. The domestically produced C919 large aircraft has started its dual aircraft commercial operation for the first time; the first domestically produced F-class 50 MW heavy-duty gas turbine has officially entered commercial operation; and the large amphibious aircraft "Kunlong" has the capability to carry out firefighting missions… China has firmly held its position as the world's second-largest economy and the largest industrial country, with its manufacturing industry ranking first in the world for 13 consecutive years. Its economic strength, technological strength and comprehensive national strength have reached a new level. 

The core CPI inflation rate has remained relatively stable, and the stable and abundant supply of rice, vegetables and fruit is the most basic and important aspect of people's well-being and the economic foundation. Compared with the stable prices in China, the US and European countries are experiencing the highest level of inflation in decades, while some developing countries are facing debt problems. The IMF predicts that the overall global inflation level will reach 6.8 percent this year. The overall inflation rate in the eurozone in June was 5.5 percent, far higher than the 2 percent inflation warning line set by the European Central Bank. According to Nikkei, the common difficulties faced by local companies are rising costs due to high prices and labor shortages. 

Global demand is weak. The World Trade Organization predicts that global merchandise trade volume is expected to grow by 1.7 percent this year, significantly lower than the average level of 2.6 percent over the past 12 years. The global manufacturing PMI new export orders index has remained in the contraction zone. Research shows that the "World Openness Index" has been declining for the past 10 years. 

In the context of insufficient global economic growth momentum, China's economy is forging ahead despite heavy burdens, injecting certainty into an uncertain world with its sustained and stable development. "We will unswervingly expand opening-up and expand economic and trade exchanges with countries around the world on the basis of mutual benefit and win-win results, and the achievement of high-level opening-up is constantly emerging," said Quan Heng, a research fellow at the Shanghai Academy of Social Sciences.

New energy vehicle production line in Haikou, Hainan Province. Photo: VCG

New energy vehicle production line in Haikou, Hainan Province. Photo: VCG

Confidence, conditions and capabilities

Economic development has never been smooth sailing. The Chinese economy has always grown and strengthened by overcoming difficulties and challenges. This is not only a historical law but also an economic law. We must adhere to the general principle of seeking progress while maintaining stability, anchor the goal of achieving qualitative and quantitative growth in the economy, and avoid addressing symptoms without tackling the root causes. We must refrain from adopting a deluge of strong stimulus policies. Some analysts believe that this path is consistent and progressive, focusing on key issues and long-term strategies and reflecting strategic determination and vitality. 

Insufficient demand is indeed a prominent problem facing the current economic operation. "After the economy and society return to normal, contact-based and service-based consumption will recover first. However, the impact and effects caused by the epidemic cannot be completely eliminated in the short term, and the endogenous driving force of consumption still needs to be strengthened," said Zou Yunhan, Deputy Director of the Macro Department of the Economic Forecasting Department of the State Information Center. By combining the implementation of the strategy to expand domestic demand with deepening supply-side structural reforms, we can fully leverage the role of consumption as the "main engine" and enable residents to consume, have the confidence to consume and be willing to consume.

In the first half of the year, industrial production steadily recovered, but profits of large-scale industrial enterprises declined year-on-year. It should be noted that, due to issues such as insufficient demand, some companies have not fully regained their confidence. In particular, some private enterprises are uncertain about development trends and investment directions. By combining the effectiveness of policies with stimulating the vitality of market entities, a series of practical and effective policy measures have been introduced to help companies operate steadily, go further and perform well.

Employment is the foundation of people's livelihoods. "Increased supply and intensified competition, combined with factors such as skills mismatch, information asymmetry and changes in career choices, have led to significant employment pressure for young people," analyzed Li Chang'an, a professor at the University of International Business and Economics. China is making efforts in strategic emerging industries, and the job opportunities in these fields are more compatible with the employment skills and needs of college graduates, which will better absorb them into the workforce. As the economy continues to recover and labor demand expands, youth employment is expected to gradually improve.

From challenges to responses, from trends to prospects, it is crucial to do a good job in economic and social development this year to build a modern socialist country in all respects and to start off on the right foot.

The authors are reporters of the People's Daily. opinion@globaltimes.com.cn